Probate

Provided by our partner, Sail Probate

When a person passes away, their estate is often subject to Inheritance Tax (IHT), in which case the value of the estate must be reported to HM Revenue and Customs (HMRC) so that the correct amount of IHT is paid and to avoid any potential penalties or disputes with HMRC. This guide will help you to navigate the reporting process, and will also list occasions where the full details must be reported even if there is no IHT to pay.

The Timelines

If you find that you need to report the details of the estate, it will need to be done within the first 12 months following the date of death, or there will be penalty fees to pay. Please note that any inheritance tax will need to be paid in the first 6 months, and the forms used in reporting the details of the estate can be a good tool for calculating how many tax is due.

Sending Details when no Tax is due

There are times when you have to send full details even when no tax is due if the person who died:

gave away over £250,000 in the 7 years before they died (£150,000 if the person died on or before 31 December 2021)
gave gifts then continued to benefit from them in the 7 years before they died
had agreed that property they’d given away during their lifetime would be part of their estate rather than pay a pre-owned asset charge
has paid into any trusts
left an estate worth more than £3 million (more than £1 million if they died on or before 31 December 2021)
died on or before 31 December 2021 and had inherited part of the Inheritance Tax threshold from a previous spouse or civil partner
had a life insurance policy that paid out to someone other than their spouse or civil partner and also had an annuity
had increased the value of a lump sum from a personal pension to be paid after their death, while they were terminally ill or in poor health
was ‘deemed domiciled’ in the UK or was living permanently outside the UK when they died but had previously lived in the UK
had foreign assets worth more than £100,000

Most estates do not need a full detailed report, as they fall into the ‘Excepted Estates’ category.

Excepted Estates - When you do not need to send details

Excepted Estates do not include any of the above scenarios and align to some other rules depending on whether they died before or after 1st January 2022.

If the person died on or after 1 January 2022, the estate is an excepted state if:

its value is below the current Inheritance Tax threshold
the estate is worth £650,000 or less and any unused threshold is being transferred from a spouse or civil partner who died in the previous 2 years. Basically, if you’re single then you * have £325k tax threshold, if you’re a couple, it’s £650k total as it’s £325k each
the deceased left everything to a spouse or civil partner living in the UK or to a qualifying charity and the estate is worth less than £3 million
the deceased was living permanently outside the UK (a ‘foreign domiciliary’) when they died and the value of their UK assets is under £150,000

If the person died before 1 January 2022, the estate is an excepted state if:

its value is below the Inheritance Tax threshold at the time the person died
the deceased left everything to a surviving spouse or civil partner living in the UK or to a qualifying charity and the estate is worth less than £1 million (search the charity register for registered UK charities)
the deceased was living permanently outside the UK (a ‘foreign domiciliary’) when they died and the value of their UK assets is under £150,000

If the estate is an excepted estate, you do not need to report the full details, however if the date of death is before 1st January 2022, you will need to fill in the IHT205 form. Either way, you will need the following values in order to fill out your probate application:

the estate’s gross value - this includes the total value of all the person’s assets and any gifts they made in the 7 years before they died
the estate’s net value - this is the gross value minus any debts, such as a mortgage or funeral costs
If they died after 1st January 2022, you will also need the estate’s net qualifying value - this is the net value minus any assets left to spouses, civil partners, charities or assets that are exempt from IHT for other reasons

Most people don't know what probate is.

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